Mary Jo White, chairwoman of the Securities and Exchange Commission, delivered strong words of support Wednesday for the work of the Public Company Accounting Oversight Board and its incumbent chairman, in remarks that suggest she may renominate him to the role.

In early September, multiple media outlets reported White was considering other candidates for the PCAOB chair role, held now by James Doty.

Several times during her remarks on Wednesday White credited Doty, the PCAOB and its audit quality initiatives for the few bright spots in the world of financial reporting and audit quality.

White admitted that a debate persists about PCAOB standards that some say require companies and auditors to do too much to document and test internal controls over financial reporting, or ICFR. The U.S. Chamber of Commerce wrote White in May to complain on behalf of its members, and in September the PCAOB met SEC staff and Chamber members to discuss their concerns.

White said “it is hard to think of an area more important than ICFR to our shared mission of providing high-quality financial information that investors can rely on.”

White also gave Doty and the PCAOB audit firm inspection program “significant” credit for what she characterized as “high” investor confidence in audited financial statements and independent auditors and the overall reduction in the number and severity of restatements of financial statements since the implementation of the Sarbanes-Oxley Act.

But White said that PCAOB inspections still find significant deficiencies in auditing the effectiveness of internal controls, assessing and responding to risks of material misstatement, auditing accounting estimates, and the work performed by audit firms outside the U.S. The SEC also recently brought two enforcement cases against national accounting firms and their partners for missing or ignoring fraud red flags in their audits.

“Such failures are totally unacceptable,” said White.

After her speech, MarketWatch asked White about her positive remarks about the PCAOB and Doty. White smiled broadly but did not comment. In early September twenty-nine supporters of Doty’s, including former SEC chairmen Richard Breeden and Arthur Levitt, as well as several academics, wrote White praising Doty’s leadership and urging White to reappoint him.

Francine
McKenna

Francine McKenna is a MarketWatch reporter based in Washington, covering financial regulation and legislation from a transparency perspective. She has written about accounting, audit, fraud and corporate governance for publications including Forbes, the Financial Times, Accountancy and the American Banker. McKenna had 30 years of experience at banks and professional-services firms, including at PwC and KPMG, before becoming a full-time writer.

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